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Eyes on Trade is a blog by the staff of Public Citizen's Global Trade Watch (GTW) division. GTW aims to promote democracy by challenging corporate globalization, arguing that the current globalization model is neither a random inevitability nor "free trade." Eyes on Trade is a space for interested parties to share information about globalization and trade issues, and in particular for us to share our watchdogging insights with you! GTW director Lori Wallach's initial post explains it all.

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July 27, 2010

From Building Cars to Packing Meat

When the Bush administration tried to sell the Panama and Colombia FTAs, it argued that the
FTAs would simply make our trade relationship a two-way street with these
countries since they already enjoy greater access to the U.S. market through trade
preference programs.(And we have still
seen rising deficits with the CAFTA countries even though much of their exports
fell under preference programs before CAFTA was implemented). South Korea,
though, does not enjoy any preferential market access, so if the FTA were to be
implemented as-is and the trade barriers come down, we will most likely see a
tremendous surge of imports.

To get a hint of the possible jobs impact of the Korea FTA,
we’ll dive more deeply into that U.S. International Trade Commission (USITC)
study that we mentioned a few weeks ago.

The USITC study indicates that jobs will likely be lost in
many high-wage industries, including auto manufacturing and electronics
manufacturing. The table below displays the USITC’s estimates of impact of the
Korea FTA upon employment and the trade deficit in a few sectors of the U.S. economy,
available in Tables 2.3 and 2.4 of the report.
The USITC gives employment changes in percent terms rather than in numbers of
jobs, so to make the loss more tangible we’ve computed the job loss numbers
based on the USITC percent change estimates and sector employment data from the
Bureau of Labor Statistics.

According to the USITC study, the auto manufacturing
industry may lose about 1,750 workers due to the Korea FTA.* The average hourly
earnings of workers in the auto industry was $23.61 in 2008, which was 9.2
percent greater than the average hourly earnings of all workers employed in the
private sector ($21.62). The average hourly earnings of workers in the
electronic equipment manufacturing industry, projected to lose about 5,000
workers, was $30.38 in 2008, which was 40.5 percent greater than the average
hourly earnings of all workers employed in the private sector.

As the table shows, large rises in the trade deficit in
these sectors are driving the employment loss, totaling up to almost $1.7
billion for motor vehicles and parts, other transportation equipment, and
electronic equipment alone. Interestingly, the USITC predicted that there would
be an absolute decline in the total value of exports in some manufacturing
sectors, not just a worsening of the balance. For example, total U.S. exports of
electronic equipment are expected to decline by up to $381 million due to the
implementation of the Korea FTA (see Table 2.3 in the study).

The structure of the USITC model does not permit the total
number of employed workers to vary, so the workers who lost their jobs in these
manufacturing sectors are assumed to be employed in other sectors.The USITC projected that the workers shed by
these high-paying industries would be absorbed by other industries, principally
low-paying industries such as meat processing that are expected to export more
goods under the Korea FTA. Employment in the bovine meat production industry
was projected to rise by 0.7 to 1.8 percent, the greatest percent increase
projected for any industry except for the industry of actually raising cattle,
sheep, goats, and horses, whose employment was also projected to rise by 0.7 to
1.8 percent.

Workers in the meat production industry are very poorly
paid. Their average hourly earnings are only $13.69, which is 36.7 percent less
than the average hourly earnings of all workers employed in the private sector.
Working in meat processing is also quite dangerous: the Government
Accountability Office [http://www.gao.gov/products/GAO-05-96] noted that,
“injury and illness rates among meat and poultry plants remain among the
highest of any industry.”

The unfavorable employment effects of the Korea FTA
projected by the USITC model can be thought of as the minimum level of employment displacement and trade deficit increase
that the Korea FTA might bring about, given that past USITC projections have
been overly optimistic. For example, a 1999 USITC studyusing roughly the same model estimated
that China’s tariff offer
for WTO ascension would only increase the U.S.
trade deficit with China
by one billion dollars. In reality, the trade deficit with China
skyrocketed by $167 billion between 2001 and 2008. Although China’s WTO ascension alone (and the favorable
trade treatment that came with it) likely did not cause the huge rise in the
trade deficit with China,
it almost certainly contributed more than one billion dollars to the rise in
the deficit.

Rep. Sander Levin and other members of Congress have
proposed a detailed set of measures
to reduce the nontariff barriers that U.S. vehicles face in the Korean
market.These measures, if included in a
reformed Korea FTA, could ensure that U.S. auto workers would benefit
from the trade pact rather than being harmed.

The Korea FTA, as currently written, will further erode the
American middle class by eliminating jobs in high-paying manufacturing
sectors.The Obama administration must fix
the Korea FTA to ensure that it benefits workers, in addition to fixing the
financial services deregulation and investor-state enforcement provisions.

* The USITC estimated “low” and “high” impacts of the Korea
FTA. The figures in this post are from the “low” estimates.

Car dealers and small rental-car companies want to be able to sell, lend or rent cars that have been recalled for a variety of defects before they're fixed. And they're working behind the scenes on Capitol Hill to make sure they can.

Car dealers and small rental-car companies want in order to sell, lend or rent cars that are recalled for many different defects before they're fixed. Plus they're working behind the scenes on Capitol Hill to guarantee they can.